Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations

The following discussion and analysis of the financial condition and results of
our operations should be read in conjunction with the consolidated financial
statements and related notes included elsewhere in this Annual Report on Form
10-K. This discussion contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those discussed
below. Such risk and uncertainties include, but are not limited to, those
identified below and those discussed in Part I, Item 1A. "Risk Factors," within
this Annual Report on Form 10-K.

Overview

We are a leading global provider of investment decision support tools, including
indexes, portfolio risk and performance analytics and corporate governance
products and services. Our products and services address multiple markets, asset
classes and geographies and are sold to a diverse client base, including asset
owners such as pension funds, endowments, foundations, central banks, family
offices and insurance companies; institutional and retail asset managers, such
as managers of pension assets, mutual funds, exchange traded funds ("ETFs"),
real estate, hedge funds and private wealth; financial intermediaries such as
banks, broker-dealers, exchanges, custodians and investment consultants; and
corporate clients. As of December 31, 2013, we had offices in 34 cities in 22
countries to help serve our diverse client base, with 52.6% of our revenue from
clients in the Americas, 35.5% in Europe, the Middle East and Africa ("EMEA")
and 11.9% in Asia and Australia, based on revenues for the year ended
December 31, 2013.

Our principal sales model in both of our business segments is to license annual,
recurring subscriptions to our products and services for use at specified
locations, often by a given number of users or for a certain volume of services,
for an annual fee paid up-front. Additionally, our recurring subscriptions are
increasingly related to our managed services offering whereby we oversee the
production of risk and performance reports on behalf of our clients. Fees
attributable to annual, recurring subscriptions are recorded as deferred
revenues on our Consolidated Statement of Financial Condition and are recognized
on our Consolidated Statement of Income as the service is rendered.
Additionally, a portion of our revenues come from clients who use our indexes as
the basis for index-linked investment products such as ETFs or as the basis for
passively managed funds and separate accounts. These clients commonly pay us a
license fee for the use of our intellectual property based on the investment
product's assets. We generate a limited amount of our revenues from certain
exchanges that use our indexes as the basis for futures and options contracts
and pay us a license fee for the use of our intellectual property based on their
volume of trades. We generate revenues from subscription agreements for the
receipt of periodic benchmarks reports, digests, and other publications, which
are most often associated with our products offered by IPD Group Limited
("IPD"), that are recognized upon delivery of such reports or data updates. We
also receive revenues from one-time fees related to implementation, historical
or customized reports, advisory and consulting services, overages relating to
proxy research and voting services, licenses of historical data sales, fees
relating to recovery of securities class action settlements and from certain
products and services that are designed for one-time usage.

In evaluating our financial performance, we focus on revenue growth for the
Company in total and by product category as well as operating profit growth. In
addition, we focus on operating metrics, including Run Rates and retention
rates, to manage the business. Our business is not highly capital intensive and,
as such, we expect to continue to convert a high percentage of our operating
profits into excess cash in the future. Our revenue growth strategy includes:
(a) expanding and deepening our relationships with investment institutions
worldwide; (b) developing new and enhancing existing product offerings,
including combining existing product features or data derived from our products
to create new products; and (c) actively seeking to acquire products,
technologies and companies that will enhance, complement or expand our client
base and our product offerings.

To maintain and accelerate our revenue and operating income growth, we expect to
continue to invest in and expand our operating functions and infrastructure,
including additional product management, sales and client support staff and
facilities in locations around the world and additional staff and supporting
technology for our

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research and our data operations and technology functions. At the same time,
managing and controlling our operating expenses is very important to us and a
distinct part of our culture.

The goal of these investments is to maximize our medium-term revenue and
operating income growth, while at the same time ensuring that MSCI will remain a
leading provider of investment decision support tools well into the future. As a
result, the rate of growth of our investments may from time to time exceed that
of our revenues, which would slow the growth of, or even reduce, our operating
profit. For example, for the year ended December 31, 2013, our revenues grew by
9.0% but our operating income only grew by 7.1% compared to the year ended
December 31, 2012 due, in part, to increased investment in the business. We
anticipate that our increases in spending in areas such as sales, client
service, information technology and product development in the year ending
December 31, 2014 will continue to exceed the rate of growth of our revenues and
will again slow the growth of our operating profit. However, we believe these
investments will result in higher revenue and operating profit growth over the
medium-term.

Operating Segments

We operate as two segments: the Performance and Risk business and the Governance
business. See Note 14, "Segment Information" of the Notes to the Consolidated
Financial Statements included herein for further information about MSCI's
operating segments.

Our Performance and Risk business is a leading global provider of investment
decision support tools, including equity indexes, real estate indexes and
benchmarks, portfolio risk and performance analytics, credit analytics and
environmental, social and governance ("ESG") products. Our Performance and Risk
products are used in many areas of the investment process, including portfolio
construction and rebalancing, performance benchmarking and attribution, risk
management, regulatory and client reporting, index-linked investment product
creation, asset allocation, the assessment of corporate management of ESG risks
and opportunities, investment manager selection and investment research. The
flagship products within our Performance and Risk business are our global equity
indexes and ESG products marketed under the MSCI and MSCI ESG Research brands,
our real estate indexes and analytics marketed under the IPD brand, our market
and credit risk analytics marketed under the RiskMetrics and Barra brands, our
performance reporting products and services offered to the investment consultant
community marketed under the InvestorForce brand, our portfolio risk and
performance analytics marketed under the Barra brand and our valuation models
and risk management software for the energy and commodities markets marketed
under the FEA brand.

Our Governance business is a leading provider of corporate governance products
and services to institutional investors and corporations around the world. Among
other things, the Governance business facilitates the voting of proxies by
institutional investors and provides in-depth research and analysis to help
inform voting decisions and identify issuer-specific risk. The Governance
business offers both global equity security coverage and fully integrated
products and services, including proxy voting; policy creation, application and
management; research; vote recommendations; vote execution; post-vote disclosure
and reporting; and data and analytical tools. It also provides securities class
action monitoring and claims filing services to aid institutional investors in
the recovery of funds from securities class action settlements. Within a
firewall designed to separate it from the rest of the Governance business, ISS
Corporate Services also provides products and services to corporate clients who
may use those products and services to learn about and improve their governance
and executive compensation practices. The flagship products within our
Governance business are our governance research, our outsourced proxy voting and
reporting services and our executive compensation analytics tools marketed under
the ISS brand. On March 31, 2013, we sold our CFRA product line, which offered
clients specialized financial research and analysis services.

On October 31, 2013, we announced that we had engaged Morgan Stanley to explore
strategic alternatives for the Governance business, including the potential
divestiture or other separation of the entire business. There can be no
assurance that the process of exploring these strategic alternatives will result
in a transaction or that any transaction will ultimately be consummated. In
addition, an adverse outcome from the pursuit of the strategic alternatives
could lead to potential future impairment charges.

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The Performance and Risk business is comprised of index and ESG, risk management
analytics, portfolio management analytics and energy and commodity analytics
products. The Governance business is comprised of the governance products.

Revenues and expenses directly associated with each respective segment are
included in determining its operating results. Other expenses that are not
directly attributable to a particular segment are allocated based upon
allocation methodologies, including time estimates, headcount, net revenues and
other relevant usage measures.

Key Financial Metrics and Drivers

Revenues

Our revenues are grouped into the following five product and/or service
categories:

Index and ESG

This category includes subscription fees from MSCI equity index data and IPD and
ESG research and analytics products, fees based on assets in investment products
linked to our equity indexes, fees from non-recurring licenses of our equity
index historical data and fees from real estate and custom indexes. We also
generate a limited amount of revenues based on the trading volume of futures and
options contracts linked to our indexes.

Clients typically subscribe to equity index data modules for use by a specified
number of users at a particular location. Clients may select delivery from us or
delivery via a third-party vendor. We are able to grow our revenues for data
subscriptions by expanding the number of client users and their locations and
the number of third-party vendors the client uses for delivery of our data
modules. The increasing scope and complexity of a client's data requirements
beyond standard data modules, such as requests for historical data or customized
indexes, also provide opportunities for further revenue growth from an existing
client. Clients who utilize our ESG research and analytics products and services
pay an annual subscription fee and access these products and services via a
web-based application, data feed or third-party vendor.

Revenues from our index-linked investment product licenses, such as ETFs,
increase or decrease as a result of changes in value of the assets in the
investment products. These changes in the value of the assets in the investment
products can result from equity market price changes, investment inflows and
outflows and changes in foreign currency exchange rates. In most cases, fees for
these licenses are paid quarterly in arrears and are calculated by multiplying a
negotiated basis point fee (which in some cases may be based on a product
provider's total expense ratio) times the average daily assets in the investment
product for the most recent period.

Risk Management Analytics Products

This category includes revenues from annual, recurring subscriptions to our risk
management analytics products including our two major products, RiskManager and
BarraOne. We have increasing recurring subscriptions to our managed services
offering in which our staff oversee the production of risk and performance
reports on behalf of our clients. Other products in this category include
HedgePlatform, InterSight, DataMetrics, Wealthbench, Credit Manager and
InvestorForce. The products offer a consistent risk assessment framework for
managing and monitoring investments in a variety of asset classes across an
organization. We are able to grow our revenues by licensing additional users and
locations as well as selling additional products and services.

RiskManager is used by clients for daily analyzing, measuring and monitoring of
market risk at fund and firm level, for sensitivity and stress testing, and
interactive what-if analysis. RiskManager is a highly scalable platform accessed
by clients via a license to a secure, interactive web-based application service,
as a fully

outsourced risk reporting service or as a web service in which a client's
systems access RiskMetrics core risk elements by connecting directly to our
systems.

Barra Aegis is a sophisticated software application for equity risk management
and portfolio analysis that is powered by our proprietary equity risk data. It
is an integrated suite of equity investment analytics modules, specifically
designed to help clients actively manage their equity risk against their
expected returns, identify returns attributable to stock selection skills and
back-test portfolio construction strategies over time. Barra Aegis also provides
a factor-based performance attribution module, which allows clients to analyze
realized returns relative to certain risk factors. A base subscription for use
in portfolio analysis typically involves a subscription to Barra Aegis and
various risk data modules. A client may add portfolio performance attribution,
optimization tools, process automation tools or other features to its Barra
Aegis subscription. By licensing the client to receive additional software
modules and risk data, or increasing the number of permitted client users or
client locations, we can increase our revenues per client further.

Barra Portfolio Manager is an integrated risk and performance platform that is
designed to help fund managers and their teams gain additional portfolio
insight, manage a more systematic investment process and make faster, more
informed investment decisions. The hosted interactive user interface allows
users to construct portfolios and back-test their strategies using the Barra
Optimizer. It also allows users to decompose the risk and attribute the return
of their portfolios according to Barra models. The platform supports optional
data management services that allow users to outsource the loading and
reconciliation of their portfolio and other proprietary data.

Our Barra Equity Models Direct risk data is distributed directly to clients who
then integrate it into their own software applications or upload the risk data
onto third-party applications. The proprietary risk data in Barra Equity Models
Direct is also available via third-party vendors. A base subscription to our
Equity Models Direct product provides equity risk data for a set fee that
authorizes one to two users. By licensing the client to receive equity risk
model data for additional countries, or increasing the number of permitted
client users or client locations, we can further increase our revenues per
client.

The Barra on Vendors product makes our proprietary risk data from our Equity
Models Direct product available to clients via third party providers, such as
FactSet Research Systems, Inc.

Energy and Commodity Analytics

Our energy and commodity analytics products consist of software applications
which help users value and model physical assets and derivatives across a number
of market segments including energy and commodity assets.

Governance

Our governance offerings consist of corporate governance products and services,
including proxy research, data and analytics, recommendation and voting services
for asset owners and asset managers, as well as data and

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advisory services for corporations. It also includes securities class action
monitoring and claims filing services to aid institutional investors in the
recovery of funds from securities class action settlements. The substantial
majority of the revenues are annual, subscription-based revenues. The largest
portion of our non-recurring revenues is included in this category as a result
of advisory and consulting services and overages relating to the proxy research
and voting services.

See Part I, Item 1. "Business-Business Segments, Products and Services" for
additional details regarding the products and services that we offer.

Operating Metrics

Run Rate

At the end of any period, we generally have subscription and investment product
license agreements in place for a large portion of our total revenues for the
following 12 months. We measure the fees related to these agreements and refer
to this as our "Run Rate." The Run Rate at a particular point in time represents
the forward-looking revenues for the next 12 months from all subscriptions and
investment product licenses we currently provide to our clients under renewable
contracts or agreements assuming all contracts or agreements that come up for
renewal are renewed and assuming then-current currency exchange rates. For any
license where fees are linked to an investment product's assets or trading
volume, the Run Rate calculation reflects for ETF fees, the market value on the
last trading day of the period, and for non-ETF funds and futures and options,
the most recent periodic fee earned under such license or subscription. The
December 31, 2012 Run Rate for IPD products was approximated using the trailing
12 months of revenues primarily adjusted for estimates for non-recurring sales,
new sales and cancellations. The Run Rate does not include fees associated with
"one-time" and other non-recurring transactions. In addition, we remove from the
Run Rate the fees associated with any subscription or investment product license
agreement with respect to which we have received a notice of termination or
non-renewal during the period and determined that such notice evidences the
client's final decision to terminate or not renew the applicable subscription or
agreement, even though such notice is not effective until a later date.

Because the Run Rate represents potential future revenues, there is typically a
delayed impact on our operating revenues from changes in our Run Rate. In
addition, the actual amount of revenues we will realize over the following 12
months will differ from the Run Rate because of:

• fluctuations in asset-based fees, which may result from changes in certain
investment products' total expense ratios, market movements or from
investment inflows into and outflows from investment products linked to
our indexes;

• fluctuations in fees based on trading volumes of futures and options
contracts linked to our indexes;

• fluctuations in the number of hedge funds for which we provide investment
information and risk analysis to hedge fund investors;

• price changes;

• revenue recognition differences under U.S. GAAP;

• fluctuations in foreign exchange rates; and

• the impact of acquisitions and dispositions.

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The following table sets forth our Run Rates and the percentage growth over the
periods indicated:

Total Run Rate grew by $83.0 million to $1,050.4 million as of December 31, 2013
compared to December 31, 2012. Total subscription Run Rate grew by $51.7 million
to $892.1 million as of December 31, 2013 compared to December 31, 2012.
Excluding the impact of the acquisition of Investor Force Holdings, Inc.
("InvestorForce") as well as the disposition of the CFRA product line, total
subscription Run Rate grew by $50.4 million as of December 31, 2013 compared to
December 31, 2012.

Subscription Run Rate from the index and ESG products grew by $33.5 million to
$371.5 million at December 31, 2013 relative to December 31, 2012, driven by
growth in equity index benchmark and data products.

On October 2, 2012, The Vanguard Group, Inc. announced its decision to change
the target benchmarks of 22 of its ETFs from MSCI's equity indexes (the
"Vanguard ETFs"). As a result of this announcement, we excluded the $138.5
billion of assets in the 22 Vanguard ETFs linked to MSCI equity indexes as of
December 31, 2012 for purposes of calculating the index and ESG asset-based fee
Run Rate, which resulted in a decrease of $24.8 million. The average value of
assets in the 22 Vanguard ETFs linked to MSCI equity indexes was $122.1 billion
for the year ended December 31, 2012 compared to the total average value of
assets in ETFs linked to MSCI equity indexes of $349.1 billion.

Asset-based fee Run Rate from index and ESG products increased by $31.2 million
to $158.3 million at December 31, 2013 compared to December 31, 2012. The
increase was primarily driven by inflows into and higher market performance by
ETFs linked to MSCI indexes. The asset-based fee Run Rate at December 31, 2012
excludes the Vanguard ETFs that later switched benchmarks.

As of December 31, 2013, assets under management ("AUM") in ETFs linked to MSCI
indexes were $332.9 billion, down $69.4 billion, or 17.3%, compared to
December 31, 2012. During the year ended December 31, 2013, MSCI-linked ETFs
were impacted by market increases of $33.9 billion and net outflows of $103.3
billion. If the AUM related to those Vanguard ETFs which transitioned earlier in
2013 were excluded from the December 31, 2012 balance, AUM in ETFs linked to
MSCI indexes would have risen $69.1 billion, or 26.2%, compared to December 31,
2012.

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Risk management analytics products Run Rate increased $28.5 million to $290.7
million at December 31, 2013 compared to December 31, 2012. Excluding the impact
attributable to InvestorForce, Run Rate grew by $18.2 million. Run Rate
continued to benefit from solid growth in the RiskManager and BarraOne products.
Changes in foreign currency positively benefited Run Rate by $1.2 million
compared to December 31, 2012.

Portfolio management analytics products Run Rate declined $6.7 million to $103.1
million at December 31, 2013 from December 31, 2012. Year-over-year Run Rate was
negatively impacted, in part, by product swaps totaling $1.1 million and by
changes in foreign currency exchange rates, which lowered Run Rate by an
additional $2.4 million.

Energy and commodity analytics products Run Rate declined to $11.3 million at
December 31, 2013, down $1.8 million from December 31, 2012.

Governance products Run Rate declined by $1.8 million to $115.5 million at
December 31, 2013 compared to December 31, 2012. Excluding the impact of the
sale of the CFRA product line from December 31, 2012, Run Rate grew by $7.2
million reflecting strong growth in the Run Rate of executive compensation data
and analytics products and services.

December 31, 2012 Compared to December 31, 2011

Total Run Rate grew by $85.4 million to $967.4 million as of December 31, 2012
compared to December 31, 2011. The December 31, 2012 Run Rate includes $39.5
million that was associated with the IPD acquisition. The Run Rate for IPD was
approximated using the trailing 12 months of revenues primarily adjusted for
estimates for non-recurring sales, new sales, and cancellations. Excluding the
impact of the acquisition of IPD, total Run Rate grew by $45.9 million. Total
subscription Run Rate grew by $78.1 million to $840.3 million as of December 31,
2012 compared to December 31, 2011. Changes in foreign currency rates reduced
Run Rate by $0.9 million as of December 31, 2012 relative to December 31, 2011.

Subscription Run Rate from the index and ESG products grew by $68.2 million to
$338.0 million at December 31, 2012 relative to December 31, 2011. Excluding the
. . .